For the first time in the history of the annual World Economic Forum’s Global Risks Report all of the top five global risks in terms of likelihood are related to climate change and environmental issues.
The report highlights the growing global awareness of the threat that climate related risks pose to lives, livelihoods and the economy, which the authors say points to the need for a multistakeholder approach to mitigating risk.
This year’s strong focus on climate and environmental related risks shows the rising perception of these threats and the increasingly urgent need to work to mitigate them, adapt to them and also protect against them.
“The political landscape is polarized, sea levels are rising and climate fires are burning. This is the year when world leaders must work with all sectors of society to repair and reinvigorate our systems of cooperation, not just for short-term benefit but for tackling our deep-rooted risks,” explained Borge Brende, President of the World Economic Forum.
The Global Risks Report publication is produced in partnership with insurance and reinsurance broking giant Marsh & McLennan and global carrier Zurich Insurance Group.
For 2020, the report forecasts a year of increased domestic and international divisions and economic slowdown, with ongoing geopolitical turbulence set to deliver a “world of great power rivalries at a time when business and government leaders must focus urgently on working together to tackle shared risks.”
More than 750 global experts and decision-makers are asked to rank their top concerns in terms of likelihood and impact for the report.
78% said that “economic confrontations” and “domestic political polarization” are expected to rise in 2020, which will hinder the urgent need to address challenges like the climate crisis, biodiversity loss and record species decline, the authors said.
The report highlights the need for policy to “match targets for protecting the Earth with ones for boosting economies” while companies need to avoid future losses by adjusting to “science-based targets.”
The top five global risks in terms of likelihood are deemed to be:
- Extreme weather events with major damage to property, infrastructure and loss of human life.
- Failure of climate-change mitigation and adaptation by governments and businesses.
- Human-made environmental damage and disasters, including environmental crime, such as oil spills, and radioactive contamination.
- Major biodiversity loss and ecosystem collapse (terrestrial or marine) with irreversible consequences for the environment, resulting in severely depleted resources for humankind as well as industries.
- Major natural disasters such as earthquakes, tsunamis, volcanic eruptions, and geomagnetic storms.
John Drzik, Chairman, Marsh & McLennan Insights, commented, “There is mounting pressure on companies from investors, regulators, customers, and employees to demonstrate their resilience to rising climate volatility. Scientific advances mean that climate risks can now be modeled with greater accuracy and incorporated into risk management and business plans. High profile events, like recent wildfires in Australia and California, are adding pressure on companies to take action on climate risk at a time when they also face greater geopolitical and cyber risk challenges.”
Peter Giger, Group Chief Risk Officer, Zurich Insurance Group, also said “Biologically diverse ecosystems capture vast amounts of carbon and provide massive economic benefits that are estimated at $33 trillion per year – the equivalent to the GDP of the US and China combined. It’s critical that companies and policy-makers move faster to transition to a low carbon economy and more sustainable business models. We are already seeing companies destroyed by failing to align their strategies to shifts in policy and customer preferences. Transitionary risks are real, and everyone must play their part to mitigate them. It’s not just an economic imperative, it is simply the right thing to do,”